— UK unions take aim after Thursday’s rate hike
— MPC members Pill, Broadbent urge gradual tightening
LONDON (MaceNews) – Bank of England Governor Andrew Bailey suffered the brickbats of UK trade unions after suggesting that workers rein in demands for pay hikes even as inflation hovers at a three-decade high.
“We do need to see restraint in the wage bargaining process,” Bailey the BBC’s Today Show Friday morning, echoing sentiments expressed on a round of media interviews following the Bank’s decision to lift interest rates by 25 basis points to 0.5% a day earlier.
“If we don’t raise rates, the squeeze on real incomes will get worse,” he told Channel 4 News on Thursday.
His comments drew venom from union leaders, already concerned by a cost-of-living crisis as inflation hit 5.4% in December, the highest level since March of 1992. Consumer price inflation could rise to 7.25% in April, according to forecasts released by the Bank on Thursday.
“Workers don’t need lectures from the governor of the Bank of England on exercising pay restraint. Why is it that every time there is a crisis, rich men ask ordinary people to pay for it,” asked Sharon Graham, general secretary of the Unite union. “Let’s be clear, pay restraint is nothing more than a call for a national pay cut.”
Bailey’s media tour came hours after UK regulator Ofgem announced a 54% rise in the energy price cap imposed on British households, which will add nearly £700 to energy bills from April
Gary Smith, general secretary of the GMB union called Bailey’s comments “a sick joke,” with the lowest-paid workers — who devote a higher percentage of income to food and energy — likely to suffer the most from energy-fuelled inflation. “According to Mr Bailey, these people should just swallow a massive real terms pay cut at the same time many are having to choose between heating and eating.”
Bank of England Chief Economist Huw Pill attempted to soften Bailey’s statement. The governor’s message was “difficult, hard and maybe unpopular news, but that’s a reflection of the circumstances,” he told a meeting of the Bank’s regional agents on Friday.
Earlier on Friday, Pill told Bloomberg Television that any future rate hikes will be modest, lamenting the trade off between fighting inflation and effects on the real economy. “The policy judgement is “quite difficult,” he said. “We’re trying to avoid the emergence off second-round effects.”
Pill was one of five MPC member who voted with the governor to limit Thursday’s rate hike to 25 basis points; four other members favoured a 50 basis point rise.
But Deputy BoE Governor Ben Broadbent, appearing with Pill at the agents briefing, took pains to downplay any suggestions of strife amongst rate setters. “There’s not much” between arguments for either-sized rate hike “that any MPC measure would disagree with.” Broadbent also joined the majority in supporting a smaller lift in Base Rate.
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